Australia’s banks will change the Banking Code of Practice to overhaul the way they manage a customer’s estate when they have died and end ‘fees for no service’ across the industry.
The Australian Banking Association today announced that it will seek new legislation to end grandfathered payments and trail commissions for financial advisers.
These reforms are the first of several key changes in response to the royal commission and include:
• Ending ‘fees for no service’ – Banks will change the way they manage ongoing financial advice, proactively contacting customers to confirm what advice is required and only charging for what is provided.
• Changing the Banking Code of Practice to improve the way banks manage a deceased estate – Once notified of a customer’s death, banks will proactively identify fees that are for products and services that can no longer be provided in the circumstances, stop charging those fees and refund any paid.
• Seeking new legislative changes to the Future of Financial Advice (FOFA) reforms to remove all legislative provisions that allow grandfathered payments and trail commissions in financial advice.
ABA chief executive Anna Bligh said these initiatives addressed two of the strongest concerns raised by the royal commission’s Interim Report.
“It has always been unacceptable for any organisations to charge fees without providing a service,” Ms Bligh said.
“This announcement will put beyond the shadow of a doubt that this practice has no place in Australia’s banking industry.
“Banks will change the way they manage a customer’s account, proactively contacting them to confirm what services are required for their investments and only charging for those provided.
“This issue of charging fees without service, particularly when customers have recently died, was raised during the royal commission and identified as unacceptable.
“When someone loses a loved one, they need support and compassion as they finalise their loved one’s financial affairs. Charging ongoing advice fees to dead people is clearly unacceptable.”
The ABA said banks are currently working with customers to refund those charged a fee where no service was provided. Latest ASIC data indicates customers will receive more than $1 billion in refunds.
“In addition to these changes, the industry is supporting legislation to remove grandfathering provisions in relation to financial advice,” Ms Bligh said.
“This is another important piece in the puzzle of ensuring there are no conflicts for advisers.”
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